Although Thailand might seem like a very attractive country to invest in property due to its relatively stable economy and high property yields, the business business environment is not as open as that of other countries such as Singapore.
In Thailand, foreigners are not allowed to own land, however, it is possible to purchase freehold condominiums as long as the ratio quota of the saleable area of the building does not exceed 49%. This means that foreigners are allowed to own condominiums in Thailand.
Although it is not possible for foreigners to buy property directly in Thailand, there are solutions to this. The best way for foreigners to own land is to buy property through a Thai company. According to Thai law, 51% of shares of any Thai company must be owned by a Thai person, the rest can be owned by foreign nationals.
There are schemes used to take advantage of this rule such as nominee shareholding. Nominee shareholding is when foreigners assign “Nominee shareholders” which could be anyone, maybe even a tuk tuk driver in some cases. These shareholders just sign the documents and take ownership without investing any money in return for money.
This way, the company will still be legal because on paper 51% of the shares are owned by Thais, but the foreigners will be the one who has control of the company and make all the decisions, the nominee shareholders are only there on paper.
Nominee shareholding is very popular in Thailand, however, we do not recommend anyone to do this, as it is highly illegal. Recently, there have also been many crackdowns on companies that use nominee shareholding, which could end up in a complete loss of investment for the foreigner.
If you want to buy landed properties in Thailand, it is better if you have real Thai partners so that it is completely legal and the risk of investment will also be split between the foreigner and the Thai person.
This is even easier if you have a Thai spouse, as they can own 51% of the shares and you will still control the company and make purchase decisions.
If you own a property in Thailand such as a condominium, you are allowed to rent it out. There are usually two main ways to rent out properties:
Please note that renting condos on a nightly or weekly basis is technically illegal in Bangkok, yes that's right, you would never know if you were scrolling through accommodations on AirBnb in Bangkok.
It is possible for landlords to find their own tenants, but it is highly recommended to use property agencies or rental services to find tenants for long term leases as they already have a client database which saves you a lot of time. These agencies will also draft the lease agreements and even assist the tenants themselves so you do not have to do it.
Short term leases are very lucrative, especially in touristic cities such as Bangkok and Chiang Mai. Short term tenants tend to pay higher rent so you will have higher returns. It is also good for foreigners who still want to use their property as a second home when visiting Thailand.
If you rent out your property to tenants, you will have to pay taxes on rental income. All rental properties are subjected to a House and Land Tax of 12.5% of the annual rental income. On top of that, rental income is taxable, so you have to pay Thai income taxes of anywhere between 0-37% on your income. There is also a withholding tax of 15% if your rental income is sent offshore.
The taxes are quite high, especially if you intend to send your income offshore, which is why there's one more way to buy property in Thailand, yes, there's always a way. Many foreigners own property through an offshore company that is not based in Thailand. This means that when you sell your property in the future, you will be selling shares of your company to the buyer, so the sale will occur outside of Thailand, which means that you will not be subjected to Thai taxes. It is also easier to pass on the property in case of death.
Buying rental properties in Thailand is definitely possible, it can also turn out to be lucrative, however, you must be aware of the laws and regulations and avoid nominee shareholding at all costs as there's a high chance it won't end well for your investment.